By Kelsey McCowan Heilman, Staff Attorney, New Mexico Center on Law and Poverty

Like many states, New Mexico has yet to make a decision about the “Medicaid Opportunity,” the chance to extend healthcare coverage under the federal healthcare reform law to most adults earning less than about $15,000 for a single adult or $32,000 for a family of four. In New Mexico, the Medicaid Opportunity would bring healthcare coverage to 170,000 uninsured low-income people. This is a dramatic opportunity for New Mexico to reduce poverty and promote economic stability. The Medicaid Opportunity would increase access to healthcare, not just for uninsured adults but for their children, who are up to three times more likely to see a doctor when their parents have coverage. And it would dramatically cut our rate of uninsured people – nearly one in three adults ages 19 to 64 in New Mexico is uninsured, the second highest rate of uninsured adults in the nation.

With so much to gain, what could possibly stop New Mexico from moving forward? Policymakers were primarily concerned about costs to the state. But a recent report by the University of New Mexico Bureau of Business and Economic Research (BBER) puts those concerns to rest. The report shows that the state will see a projected net gain to the state general fund of between $478 and $523 million between 2014 and 2020. Even after 2020, when the federal matching percentage permanently becomes 90% and the state is responsible for 10% of the costs of the newly eligible, the BBER report predicts the state’s expenditures to “expand Medicaid will be fully covered by new revenues and savings”.

The state will see these large savings for two reasons:

• First, New Mexico will save money by transferring people currently covered by the state’s high risk pool and State Coverage Insurance program (limited healthcare coverage for adults) onto Medicaid and the Exchange.
• Second, new state revenues will be generated as federal funds for Medicaid flow through the New Mexico healthcare system and into the local economy.

New Mexico taxes health insurance companies through an Insurance Premium Tax (IPT). The IPT is paid by managed care organizations that receive premium payments for new Medicaid enrollees. New Mexico then realizes additional revenues as healthcare providers bill managed care companies and are subject to Gross Receipts Taxes (GRT) on payments for goods and services. Finally, providers use those payments to hire new staff, who pay income tax and generate more GRT revenue as they spend their paychecks in local businesses. New Mexico’s Legislative Finance Committee has concurred with the BBER data that shows these new revenues alone total about $500 million for the state.

But the benefits to New Mexico extend far beyond this $500 million boost to our state’s coffers. Read the next installment in this blog series to find out more about the benefits.